BML (TSE:4694) Is Due To Pay A Dividend Of ¥60.00

BML, Inc. (TSE:4694) has announced that it will pay a dividend of ¥60.00 per share on the 3rd of December. This will take the annual payment to 3.7% of the stock price, which is above what most companies in the industry pay.

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BML's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, BML's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to grow by 11.1% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 83% - on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for BML

BML Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥30.00 in 2015 to the most recent total annual payment of ¥120.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, BML's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company has been growing at a pretty soft 1.2% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for BML that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.